The New Face of Unequal Exchange: Low-Wage Manufacturing, Commodity Chains, and Global Inequality

The institutional structure of global commodity chains and cross-border production networks has a profound impact on how the benefits of globalized production are distributed. This paper engages with this issue by developing a model that combines the insights of earlier unequal exchange theorists and new work on global commodity chains to clarify the distributive dynamics of the expansion of low-wage manufacturing in the developing world. In this framework, the ability of productivity-led development to raise employment incomes in low-wage manufacturing is constrained and depends on how the benefits of productivity improvements are captured – as lower prices for consumers or higher rents for brandname multinationals. In contrast, consumption-led growth in relatively affluent consumer markets will contribute to income convergence when demand for manufactured consumer imports is sufficiently income elastic. However, in the long-run, labor market, macroeconomic, and environmental constraints will likely compromise this form of export-led employment growth. JEL Classification: F02, F23, O19